Asian Equity Market
Japanese markets played catch up after their holiday and ended Friday’s session with -2.82% paced by risk-off flows due to the stronger Yen and concerns over domestic growth.
Asia markets, in general, were slightly tempered as the Dollar strength and an adjustment in the risk mood, seeped into late Asian Trade. Meanwhile, SHCOMP outperformed throughout the week with a potential break of the downtrend line from 14 Jul buoyed by the positive sentiment in China.
European Equity Market
Major bourses traded within a narrow range at the beginning of the week. However, European shares fell to a one-month low on Friday across all indices due to weak earnings results.
US Equity Market
US equities traded within a wide range throughout the week with a significant rise on Wednesday and Friday.
On Wednesday, the Fed reiterated that they would maintain interest rates near zero for as long as it takes to recover from the pandemic, which drove U.S. Equity indices up. The US stocks ended the week and the month on an upswing as a rally in tech shares led major indices higher, in particular the tech index, Nasdaq. The strong earnings from some of the largest US companies contributed to the index gains.
US 30Y Treasury yields moved in line with the US equity markets throughout the week which could indicate that the outflow of funds from the credit markets to the equity markets is based on the overall risk sentiment. The US 2Y – 10Y curve flattened for the bulk of the week as investors waited for Washington lawmakers to reach a deal on Covid-19 relief. The flattened US 2Y-20Y curve illustrates investors’ expectations over weak growth and low inflation. Bond volatility, as measured by the Move index, moved to all-time lows, as the Fed’s expansion of the balance sheet pushed volatility in the rates space down.
Silver reached a near-term blow-off top on Tuesday, with the Dollar’s performance dictating the moves in the precious metals space. Volatility in Silver was elevated as the metal traded within a wide range throughout the week.
Base metals saw less volatility as copper and nickel traded within a narrow range. On Wednesday, Zinc was the outperformer rising +2.25% following reports that China became a net steel importer in June, which happened for the 1st time since 2009.
After a week of consecutive daily losses in the Dollar, the Dollar index bounced off a 2 year low on Tuesday. However, the bounce appeared short-lived and looked primed for further weakness as the US continued to see a rise in the number of Covid-19 cases. With the Fed’s historic expansion of the balance sheet and jobless benefits already weighing on the Dollar, an extension for the impending expiration of the benefits and uncertainty over the upcoming US presidential elections has added to the Dollar’s sinking feeling. Some respite came on Friday, where the Dollar rose against a basket of currencies as month-end flows had investors covering shorts and taking profit after the biggest monthly decline in the currency in a decade.
AUD continued to benefit from the weakened Dollar throughout the week except on Friday when the Dollar markedly, wiping out the four previous days of gains.
The Euro breached the technically important $1.16 level and continued to climb, hitting highs last seen in September 2018. The Euro’s strength was also aided by the stronger than expected June preliminary PMI in Germany and the EU.
The pound held near a 4-month high as retail sales prints came in better than expected. The pound breached the 1.310 level, before failing near the resistance at 1.320. Friday’s decline broke a series of 10 consecutive days of gains.
The risk-off sentiment led to a rise in the Yen against the Dollar. There is still some divergence between the risk-on sentiment in the equity market and the risk-off sentiment in the currency market. However, on Friday, the Dollar strengthened against the Yen, casting aside gains from the previous days.
Throughout the week, gold traded to within USD20 of the USD2000/ounce but was thwarted by bouts of strength in the Dollar. Falls were fleeting though, with gold recovering from Thursday’s drop. There may be some possible hints of exhaustion in Gold in the daily chart, after its torrid pace of gains in the last 2 weeks.
HIGHLIGHTS OF THE WEEK
- Senate Republicans released their proposal for phase four stimulus on Monday evening. Altogether, the proposals held few surprises and would – provide another round of tax rebates, $1,200 per adult and $500 per dependent, for individuals making $75k or less; scale back the $600/week enhanced unemployment benefit to $200/week for two months to allow states to implement a new 70% wage replacement formula that would run through end-2020; provide $60bn in new Paycheck Protection Program (PPP) funding and repurpose the $130bn in unused PPP funding for another round of loans targeting smaller businesses that continue to face demand shortfalls; provide $105bn for schools, two-thirds of which would go to schools that implement a re-opening plan; institute a liability shield for businesses that make a “reasonable” effort to follow local health guidelines; and increase employer tax credit incentives for worker retention. The Republican proposal did not include aid for state & local governments
- The FOMC statement noted its commitment to using its full range of tools to support the US economy amid the tremendous human and economic hardships and warned that the path of the economy would depend significantly on the course of the virus, with Fed chair Powell warning that the Covid-19 resurgence was starting to “weigh.” The Fed also said it would increase its holdings of UST and agency MBS to at least the current pace to sustain smooth market functioning. The Fed also announced it would extend the temporary liquidity swap lines to nine foreign central banks and the foreign repo program through 31 March 2021. Continuing on the Fed, they announced that they were extending for three months the key emergency programs that were due to expire at end September
- In the US, initial jobless claims rose for the second consecutive week by 12k to 1.43m. Personal income shrank 1.1% in June, but personal spending rose again by 5.6%. The core PCE deflator also rose 0.2% m/m (0.9% y/y) in June, while the Chicago PMI surged from 36.6 in June to 51.9 in July
- Escalating US-Sino tension over Tik-Tok, amongst other Chinese apps. Of note, Mike Pompeo shared that the Trump administration is poised to announce a decision on Tik-Tok and “a broad array” of Chinese owned software deemed to pose national-security risks. Trump said that he planned to ban the video-sharing app, but the secretary of state’s comments suggest an expansion of possible targets
- On the Covid-19 vaccine front, Pfizer and BioNTech started a Phase 2/3 safety and efficacy clinical study on their vaccine while Moderna received another $472 million award from the U.S for its vaccine efforts
- Germany’s 2Q20 gross domestic output shrank by -10.1% q/q and -11.7% y/y. The results were worse than consensus estimates of -9%
- Spain reported a record plunge in 2Q20 GDP of -18.5% q/q. The severity of this fall illustrated the effects of Spain’s lockdown since mid-march
- French economy contracted -13.8% q/q in 2Q20. However, the economy was quick to recover towards the end of the quarter, running at an approximate 90% capacity in July
- China passenger traffic flow recovered to nearly 70% of the same period last year which indicated citizen’s confidence in the Chinese government to deal with the pandemic
- China warned the United Kingdom on Thursday that the UK will not have a future if they attempted to decouple from China. China’s ambassador stated that the UK would “pay the price” for treating China with such hostility
- Hong Kong economy contacted for the fourth straight quarter by 9.0% y/y (-0.1% q/q sa)
- Hong Kong postpones the Legislative Council elections for a year ‘over virus concerns’. However, democracy campaigners have accused the government of using the pandemic as a pretext to stop people from voting, with this election being the first after the controversial National Security Law was implemented. Police have disqualified 12 democratic candidates from the election
- In Singapore, the MAS asked banks to cap their 2020 dividends at 60% of last year’s levels, pushing bank stocks down for the entirety of Thursday’s trading
- The total, resident, and Singapore unemployment rates jumped to 2.9%, 3.5%, and 4% respectively in 2Q20. Total employment excluding FDW fell by a record of 121,800. This is more than 4x the 25,600 decline in 1Q20, even though retrenchments only rose to 12,760. The labor market is likely to deteriorate further, and the total unemployment rate may rise to 3-3.5% by year-end, potentially warranting more policy assistance
- The construction of an $880 million light rail project linking Malaysia’s southern state of Johor with Singapore will begin in 2021. It is expected to complete by 2026
|All Day||Canada – Civic Holiday|
|6:30||AUD||AIG Manufacturing Index (Jul)|
|9:45||CNY||Caixin Manufacturing PMI (Jul)|
|12:00||IDR||Core Inflation (YoY) (Jul)|
|12:00||IDR||Inflation (MoM) (Jul)|
|13:30||GBP||Investing.com GBP/USD Index|
|13:30||USD||Investing.com Gold Index|
|13:30||USD||Investing.com S&P 500 Index|
|13:30||CAD||Investing.com USD/CAD Index|
|13:30||AUD||Investing.com AUD/USD Index|
|13:30||JPY||Investing.com USD/JPY Index|
|13:30||EUR||Investing.com EUR/USD Index|
|15:15||EUR||Spanish Manufacturing PMI (Jul)|
|15:45||EUR||Italian Manufacturing PMI (Jul)|
|15:50||EUR||French Manufacturing PMI (Jul)|
|15:55||EUR||German Manufacturing PMI (Jul)|
|16:00||EUR||Manufacturing PMI (Jul)|
|16:30||GBP||Manufacturing PMI (Jul)|
|21:45||USD||Manufacturing PMI (Jul)|
|22:00||USD||ISM Manufacturing Employment (Jul)|
|22:00||USD||ISM Manufacturing PMI (Jul)|
|0:30||USD||FOMC Member Bullard Speaks|
|7:30||JPY||Tokyo Core CPI (YoY) (Jul)|
|7:30||JPY||CPI Tokyo Ex Food and Energy (MoM) (Jul)|
|9:00||AUD||Trade Balance (Jun)|
|9:30||AUD||Retail Sales (MoM) (Jun)|
|11:35||JPY||10-Year JGB Auction|
|12:30||AUD||RBA Interest Rate Decision (Aug)|
|12:30||AUD||RBA Rate Statement|
|15:00||EUR||Spanish Unemployment Change|
|22:00||USD||Factory Orders (MoM) (Jun)|
|4:30||USD||API Weekly Crude Oil Stock|
|8:30||JPY||Services PMI (Jul)|
|9:45||CNY||Caixin Services PMI (Jul)|
|9:45||CNY||Chinese Composite PMI (Jul)|
|15:15||EUR||Spanish Services PMI (Jul)|
|15:45||EUR||Italian Services PMI (Jul)|
|15:50||EUR||French Services PMI (Jul)|
|15:55||EUR||German Services PMI (Jul)|
|16:00||EUR||Markit Composite PMI (Jul)|
|16:00||EUR||Services PMI (Jul)|
|16:04||IDR||GDP (QoQ) (Q2)|
|16:30||GBP||Composite PMI (Jul)|
|16:30||GBP||Services PMI (Jul)|
|17:00||EUR||Retail Sales (MoM) (Jun)|
|20:00||JPY||BoJ Governor Kuroda Speaks|
|20:15||USD||ADP Nonfarm Employment Change (Jul)|
|20:30||USD||Trade Balance (Jun)|
|20:30||CAD||Trade Balance (Jun)|
|21:30||USD||Seevol Cushing Storage Report|
|21:45||USD||Markit Composite PMI (Jul)|
|21:45||USD||Services PMI (Jul)|
|22:00||USD||ISM Non-Manufacturing Employment (Jul)|
|22:00||USD||ISM Non-Manufacturing PMI (Jul)|
|22:30||USD||Crude Oil Inventories|
|22:30||USD||Cushing Crude Oil Inventories|
|5:00||USD||FOMC Member Mester Speaks|
|14:00||GBP||BoE Inflation Report|
|14:00||GBP||BoE MPC vote cut (Jul)|
|14:00||GBP||BoE MPC vote hike (Jul)|
|14:00||GBP||BoE MPC vote unchanged (Jul)|
|14:00||GBP||BoE QE Total (Jul)|
|14:00||GBP||BoE Interest Rate Decision (Jul)|
|14:00||GBP||BoE MPC Meeting Minutes|
|14:00||EUR||German Factory Orders (MoM) (Jun)|
|14:15||INR||Interest Rate Decision|
|15:30||EUR||IHS Markit Construction PMI (Jul)|
|16:30||GBP||Construction PMI (Jul)|
|17:00||EUR||Spanish 10-Year Obligacion Auction|
|19:30||GBP||BoE Gov Bailey Speaks|
|20:30||USD||Initial Jobless Claims|
|22:00||USD||FOMC Member Kaplan Speaks|
|0:00||GBP||BoE Financial Stability Report|
|7:30||JPY||Household Spending (YoY) (Jun)|
|7:30||JPY||Household Spending (MoM) (Jun)|
|9:30||AUD||Home Loans (MoM)|
|9:30||AUD||RBA Monetary Policy Statement|
|9:45||AUD||RBA Assist Gov Ellis Speaks|
|14:00||EUR||German Industrial Production (MoM) (Jun)|
|14:00||EUR||German Trade Balance (Jun)|
|14:45||EUR||French Non-Farm Payrolls (QoQ) (Q2)|
|15:30||GBP||Halifax House Price Index (YoY)|
|15:30||GBP||Halifax House Price Index (MoM) (Jul)|
|16:12||CNY||Exports (YoY) (Jul)|
|16:12||CNY||Imports (YoY) (Jul)|
|16:12||CNY||Trade Balance (USD) (Jul)|
|20:30||USD||Average Hourly Earnings (MoM) (Jul)|
|20:30||USD||Average Hourly Earnings (YoY) (YoY) (Jul)|
|20:30||USD||Nonfarm Payrolls (Jul)|
|20:30||USD||Participation Rate (Jul)|
|20:30||USD||Private Nonfarm Payrolls (Jul)|
|20:30||USD||Unemployment Rate (Jul)|
|20:30||CAD||Employment Change (Jul)|
|20:30||CAD||Unemployment Rate (Jul)|
|22:00||CAD||Ivey PMI (Jul)|
This document is prepared for clients of Envysion Wealth Management (“Envysion”) only. Information has been obtained from sources believed to be reliable but Envysion or its affiliates and/or subsidiaries do not warrant its completeness or accuracy except with respect to any disclosures and it should not be relied on as such. The information, opinions, estimates and forecasts contained herein are as of the date of this document and are subject to change without notice.
We have not considered any individual’s portfolio, investment objectives, risk tolerance, portfolio diversification or particular needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this communication must make his/or own independent decisions regarding whether this communication and any securities or financial instruments mentioned herein, is appropriate in the light of its existing portfolio holdings and/or investment needs.
The information in this document cannot disclose everything about the nature and risks of the above mentioned product. This is not an exhaustive list of the risks involved, nor should it be regarded as offering advice on the suitability of these investments for you. In addition to considering your own circumstances and needs, please read carefully and make sure you understand this product’s objectives, risks, charges and expenses, as well as the contents of any term sheet or such equivalent documentation before you make any investment.
Before making any investment, you should consider all risks carefully and consult an independent financial adviser as necessary before dealing with any financial products mentioned in this document.
This document may contain information proprietary to Envysion which may not be reproduced or redistributed in whole or in part without Envysion’s prior consent. It is not an offer or a solicitation nor an advice or by itself a recommendation with respect to such investment products. It does not have regard to the specific investment objectives, investment experience, financial situation and the particular needs of any recipient or customer. You should exercise caution in relation to any potential investment. You should independently evaluate the presented product and consider the suitability of such investment, considering your own specific investment objectives, investment experience, financial situation and/or particular needs. You will need to decide on your own as to whether or not the contents of this document are suitable for yourself. If you have any doubt about the contents of this document and/or the suitability of any investment products mentioned herein, you should obtain independent financial, legal and/or tax advice from your professional advisers as necessary.
Envysion is not in the business of providing, and do not provide, tax, accounting or legal advice to any clients. The material contained herein is prepared for informational purposes and is not intended or written to be used, and cannot be used or relied upon for tax, accounting or legal advice. You are responsible for consulting your own independent advisor as to the tax, accounting and legal consequences associated with your investments/transactions based on your particular circumstances. This document and other related documents have not been reviewed by with the Monetary Authority of Singapore nor any regulator elsewhere.
This document may not be published, circulated, reproduced or distributed in whole or in part to any other person without Envysion’s prior written consent. This document is not intended for distribution to, publication or use by any person in any jurisdiction outside Singapore, where such distribution, publication or use would be contrary to applicable law or would subject Envysion and its related corporations, connected persons, associated persons and/or affiliates (collectively, “Affiliates”) to any registration, licensing or other requirements within such jurisdiction.
Investments carry significant risk, including the possible loss of the principal amount invested. Financial instruments or other products denominated in a foreign currency are subject to exchange rate fluctuations, which may have an adverse effect on the price or value of an investment in such products. No liability is accepted by Envysion for any loss (whether direct, indirect or consequential) that may arise from any use of the information contained in or derived from this document.
Past performance is not a guarantee or indication of future results. Any prices provided in this document (other than those that are identified as being historical) are indicative only and do not represent firm quotes as to either price or size. You should contact your advisor directly if you are interested in buying or selling any financial instrument or other product or pursuing any trading strategy, investment strategy or wealth planning structure that may be mentioned in this document.
While reasonable efforts have been made to ensure that the contents of this document have been obtained or derived from sources believed by Envysion to be reliable, neither Envysion nor its Affiliates has independently verified the accuracy of such source(s). Envysion and its Affiliates and their respective officers, employees, agents and representatives do not make any express or implied representations, warranties or guarantees as to the accuracy, timeliness or completeness of the information, data or prevailing state of affairs that are mentioned in this document and do not accept any liability for any loss or damage whatsoever, direct or indirect, arising from or in connection with the use of the contents of this document.
Envysion and its Affiliates may have issued other reports, analyses, or other documents expressing views different from the contents hereof and all views expressed in all reports, analyses and documents are subject to change without notice. Envysion and its Affiliates reserve the right to act upon or use the contents hereof at any time, including before its publication herein. The author of this document may have discussed the information contained therein with others within or outside Envysion and the author and/or other personnel may have already acted on the basis of this information (including communicating the information contained herein to other customers of Envysion). Envysion, its personnel (including those with whom the author may have consulted in the preparation of this communication), and other customers may be long or short the financial instruments or other products referred to in this document, may have acquired such positions at prices and market conditions that are no longer available, and may have interests different from or adverse to your interests.
This document is not intended for circulation or distribution outside Singapore, other than to whom such circulation or distribution is permitted by, or is exempt from the requirements of, the applicable laws and regulations of Singapore.